Economic subjects | Marketing » SPOTX, Auto Advertising, How Digital Video is Driving the Industry

Source: http://www.doksinet AUTO ADVERTISING HOW DIGITAL VIDEO IS DRIVING THE INDUSTRY Source: http://www.doksinet 2 Source: http://www.doksinet Automotive Advertising How Digital Video is Driving the Industry The auto industry is legendary in the to generate business. Fast forward nearly advertising arena. Legendary for its 100 years, and they continue to lead the innovation, creativity, and sheer pervasiveness. advertising revolution, now with digital Nowhere has this been more evident than advertising and specifically, digital video. video advertising. From major automotive manufacturers’ commercials for their newest As with any industry that has grown and models with elite production values, to dealer evolved for nearly a century, it has navigated association ads that establish more personal transformative changes to the business messaging designed to drive consumer over the years. Among the greatest of interest, to individual dealer videos that those

changes has been the development often become immensely recognizable in of new technology that impacts marketing their local markets and get potential buyers and communications with consumers into showrooms – automotive ads run the (radio, TV, and of course – the internet). As gamut from branding to direct response with consumers have adopted the use of new a history of tremendous success. Over the media, advertisers in every industry have years, the auto industry has been masterful in worked to stay in sync with the ways they its ability to generate consumer interest and can best reach their customers. For the auto brand loyalty. industry, evolving with the needs and wants of consumers is even more complex, as the Since the early 1900s automobile companies industry is stratified into three fairly distinct have been leveraging the power of advertising tiers. 3 Source: http://www.doksinet Auto manufacturers are the foundation. They Auto dealerships are the

ultimate destination build the cars that consumers buy and drive. of the consumer journey, when they are ready Cars that connect with and express a driver’s to make that next car purchase. Dealership individual personalities and personas. They and dealership group advertising is focused on also build powerful brands that drive long capturing demand, while continuing to brand, term consumer loyalty. From an advertising and getting consumers to visit showrooms. perspective, much of their focus is on driving brand awareness, capturing consumer The three groups come together to wield an attention and driving interest in their newest immense advertising budget every year and models. digital has been a growing piece of the pie for some time. Dealer associations comprise the second tier. They build on the messaging of the According to eMarketer, ad spending on paid manufacturers and help get potential car digital media by the US automotive industry buyers to narrow

their focus and begin driving will hit $8.71 billion in 2016, up 173% year-over- demand. year. This figure will climb to $1414 billion by 2020, for a compound annual growth rate (CAGR) of 13.7% from 2015 to 20201 US Automotive Industry Digital Ad Spending, 2014-2020 % change and % of total digital ad spending (in billions) $14.14 $12.73 $11.30 $9.94 $8.71 $7.43 $6.10 17.4% 12.3% % change 21.8% 12.5% 17.3% 12.7% 14.1% 12.8% 13.7% 13.2% 13.4% 13.0% 12.7% 11.1% % of total digital ad spending Note: CAGR (2014-2020) = 13.7%; includes advertising that appears on desktop and laptop computers as well as mobile phones, tablets and other internet-connected devices, and includes all the various formats of advertising on those platforms Source: eMarketer, March 2016 4 Source: http://www.doksinet The power of video advertising - the sight, to connect with consumers who are on-the-go sound and motion of it - has been critical to by delivering content, literally into their

hands. automobile companies since the advent of TV, and this continues today. Digital video The auto industry has recognized that (especially pre-roll) and the power of multi- consumer audiences are rapidly fragmenting screen mobility is a huge advantage to the across screens and devices, and has adapted auto industry and is being leveraged more and to a steadily growing range of choices for more every day. watching video content. This paper will look at some of the challenges and opportunities auto Technology, video delivery and the shift in advertisers have encountered as consumer media consumption have changed the way in attention continues to be split across more which virtually every industry advertises its screens, seemingly every day. In addition, the products and services. We are experiencing focus will be more at the dealer and dealer a consumer shift that takes the traditional association level, and how digital video is living room viewing experience and

moves it becoming more and more a part of their anywhere and everywhere. Brands now need advertising strategies. 5 Source: http://www.doksinet Challenges Challenge: Changing Consumer Behavior The auto industry is certainly not alone in the need to deal with rapidly evolving consumer behavior, but the challenge is more complex than for most industries. Virtually every industry has felt some impact on their marketing strategies and tactics from fragmented consumer attention across devices and mobile consumerism. However, the auto industry has also had to adjust to deep shifts in car buying behavior, driven by consumers’ digital access to information. Several noteworthy consumer changes include: • The rise of the well-educated buyer. Before today’s car buyer ever steps foot in a dealership, they have done their research online or via mobile. In years past, car buyers ‘researched’ by visiting several dealerships, gathering information, and then making a decision. Today,

they will typically walk into just ONE dealership, armed with all the info they need to negotiate and make a car buying decision. This process has been termed “showrooming” and has become more and more the normal buying process for today’s car buyers. • Easy access to information. The use of online resources like Kelly Blue Book, provide potential car buyers with pricing info not just from the manufacturer or even one dealer, but from multiple dealers. This empowers them to shop for the best price without needing to speak with a salesperson (the traditional source of price info) on a dealership-by-dealership basis. • Online ‘dealerships.’ Today consumers can use 3rd party companies like TrueCar and Autotrader to avoid visiting a traditional dealership entirely. 6 Source: http://www.doksinet Sources that Influence Car Purchases According to US Car Buyers, by Generation, Fall 2013 % of respondents in each group Car reviews on Independent websites 70% 59% Family and

friends 66% 44% Manufacturer websites 53% 35% News articles/media reviews 45% 34% Salesperson at the dealership 40% 27% Social network sites 32% 11% !*ƫ .!2%+1/ƫ!*!.0%+*/ Note: *born between 1977-1994 Source: Deloitte, *2014 Global Automotive Consumer Study, Jan 16, 2014 Challenge: The Millennial Generation This new ‘normal’ in car buying is certainly a product of new technology and the proliferation of mobile devices, but it can also be tied to the coming of age of a younger generation and the ways they use technology. Meet the millennials. Adweek noted this trend as far back as 2013 and it hasn’t slowed in recent years. While such a mobile-heavy, privacy-envelopepushing approach may make some brands uncomfortable, the auto companies may have no choice, according to Clayton Stanfield, senior manager of dealer outreach for eBay Motors. That’s because the millennial generation, the auto industry’s next crucial target, lives this way. Stanfield said that millennials

won’t tolerate the typical four-hour experience of buying a car from a dealer. They’ve done all the research on models, financing, etc., and they expect the experience to be quicker than the local salesperson wants. And they expect to be able to whip out their phones to comparison shop while they’re walking the car lot. “There’s a huge disconnect,” said Stanfield. - Clayton Stanfield, Adweek, 20132 7 Source: http://www.doksinet The millennial generation, which now makes up the largest population of any generation in the US, is also forecasted to be the wealthiest generation in history. Their buying power will easily outweigh the previous generation (Generation X), and according the Deloitte research, in the next 10 years, 40% of all new vehicles will be sold to millennials, and they’ll be buying cars for decades to come. There is some research about this generation that suggests that they are less-concerned with purchasing a car than their predecessors. A study by

Zipcar found that millennials are more %*(%! to use on-demand mobility services (ride sharing, car sharing, etc.) than other generations Key Findings • The increasing availability of on-demand mobility services (such as car sharing, rideƫ sharing and vehicle sharing) helps many Millennials drive less and makes it easier to forƫ them to live without owning a car.ƫ • On-demand transportation options (transportation “apps”) have a greater impact onƫ millennialsŏƫdriving decisions than on the decisions of older generations. • Technology, especially mobile devices, is more important to millennials than a car. • Traditional influences, like the high cost of car ownership and environmental concerns ofƫ driving, are compelling many millennials to drive less. 8 Source: http://www.doksinet However, other data from Autotrader shows car is not typically a want purchase for them. that as millennials get older they do tend Although, this too may change as their

annual to become car owners, much like their income rises over the years and a car purchase predecessors. In fact, 84% of older millennials can become more discretionary. When they own a car and while half of younger millennials do decide to buy, they tend to be brand and don’t currently own a car, 73% intend on image conscious and, not surprisingly, they buying one within a year or more. want all the latest technologies available in their chosen vehicle. Mercedes-Benz is More than any other generation, the millennial one luxury brand looking to engage with car buyer is driven by research, customer millennials through the use of social media reviews and opinion, and feel. They don’t want with their “MB Photo Pass” campaign to be sold. They will make their choice to buy through collaboration with videographers, a car when they decide they need to, as a photographers and a group of social media influencers.3 9 Source: http://www.doksinet 22.1% 22.0%

21.9% 21.9% 21.9% 21.9% 21.9% 12.3% 12.5% 12.7% 12.8% 13.0% 13.2% 13.4% 12.4% 12.3% 12.2% 12.2% 12.0% 11.9% 11.8% 11.2% 11.1% 11.0% 10.9% 10.8% 10.7% 10.6% 8.4% 8.5% 8.7% 8.8% 8.9% 9.0% 9.1% 8.3% 8.3% 8.3% 8.2% 8.1% 8.0% 7.9% 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% 5.6% 5.8% 5.9% 5.8% 5.8% 5.8% 5.8% 4.7% 4.8% 4.8% 4.9% 5.0% 5.1% 5.2% 2.8% 2.8% 2.8% 2.8% 2.9% 2.9% 3.0% 4.8% 4.5% 4.3% 4.3% 4.2% 4.0% 3.9% eMarketer, March 2016 Challenge: Navigating the Digital Marketing Ecosystem the always evolving digital arena. Recently, we saw a great example of how quickly the digital ad space can change, with the launch and immediate global success of Pokemon Go. The day before the launch, who would Mastering the constantly evolving digital marketing ecosystem can be another tremendous challenge for any industry and perhaps especially those that continue to rely heavily on traditional media as well. Certainly the automotive

industry has been at the forefront of adopting and using digital media. In fact, they rank just below retail as the biggest industry adopter of digital advertising according to eMarketer. have guessed that in the span of a few days a new app could appear that would literally have as many daily users as Twitter? The closest example in traditional media might be a brand new show TV show premiering and becoming the most popular show on the air overnight, while at the same time engaging viewers in ways that no other show had ever successfully managed (maybe the launch of a show like American Idol is the closest associations and individual dealers may find this sort of While the auto industry continues to be a huge player in digital advertising, it doesn’t mitigate speed of light evolution to be very difficult to manage). the challenge of constantly staying on top of 10 Source: http://www.doksinet Challenge: Driving and Measuring Performance We have already mentioned that the auto

industry covers the full range of marketing initiatives from branding to demand generation. One of the biggest challenges facing dealers and dealer associations is leveraging digital to drive consumer action – with the end result being to produce an offline visit to a showroom to buy a car. Connecting the dots from an online video ad to an activity that happens offline has always been a challenge for advertisers. Auto advertisers in the Tier 2 and 3 groups need to measure the results of their ad spend in tangible ways, tracking toward a mix of online and offline key KPIs like: • Website visits * Online inventory searches * Dealership visits * Service department visits * Car sales (the ultimate goal) The ability to measure these types of metrics and attribute them back to specific advertising activities is critical, so working with partners who can deliver this kind of tracking provides a huge benefit, especially in the realm of campaign optimization. Supporting evidence

from Dealersocket concludes that traditional marketing (radio, billboards, TV ads and even tent sales) struggles to deliver the ROI it has in the past. Particularly in the pre-owned auto market, their research indicates that digital marketing generates a significantly higher profit margin on each sale. DealerSocket data shows that: “It costs $150 of digital marketing to sell one car. Compare that to $1,581 of traditional media. If you stick with conventional methods, you’ll pay 10 times more than necessary.”4 11 Source: http://www.doksinet Opportunities Opportunity: Engaging Consumers on Every Screen That ever more fragmented viewing audience, that now watches video ads on their TVs, laptops, tablets, and smartphones is now reachable literally everywhere they go. Whereas automobile advertisers were once limited to the home TV screen to deliver video content, now they have the ability to provide engaging video content to consumers on the move. The multi-screen environment also

offers opportunities to tailor video messaging In the new auto buying model, where consumers do the majority of their research before visiting a showroom, dealers can use digital and specifically digital video to not just provide information, but to build rapport with consumers and help lead them to visit the dealership in a buying mode. Increasingly, consumers are also engaging in simultaneous, multi-screen viewing (watching a TV commercial in their living room, while also navigating the web on their tablet or smartphone). The ability to ensure that a TV commercial can lead a consumer to visit a website and that the content on the site will tie in to what they have just seen on TV empowers auto advertisers to engage with their audiences in powerful ways. to each type of screen and potentially to where the consumer is watching content as well as using audience targeting to ensure relevant content is being delivered to each viewer. 12 Source: http://www.doksinet Opportunity:

Interactivity and Engagement Opportunity: Measuring Performance Digital video delivers a unique level of Digital has always offered the ability to track interactivity that can drive consumer a variety of performance metrics more easily engagement like no other marketing medium. than traditional marketing mediums. But, Interactive ad units can easily and seamlessly even that tracking has evolved over the years, take a consumer from a video ad to a dealer’s allowing advertisers to gain more insight into website to search available inventory, schedule how a digital ad can help push consumers a service appointment, or a host of other to take action. One of the most significant activities. With today’s consumer doing the developments is the trend away from a “last lion’s share of their product research before click wins” approach in analyzing performance they set foot on a dealer’s lot (“showrooming,” metrics. Automobile companies have always as

mentioned before), interactive ad units known that there are many touch points during offer the ability to make that research process the consumer journey from initial awareness easier for the consumer and lead them toward to actually buying a car. Today’s buying a particular dealership. process has shifted much of that journey online through the researching phase. This enables Digital video also generates engagement like auto advertisers to measure the performance no other medium as there is nothing quite like of their digital ads in new ways, beyond a high quality video to engage a consumer, simply tracking clicks. Now advertisers will especially when they are holding that video track users who viewed an ad (especially a in their hands. Automotive brands love video video ad) and did not click, but later visited because car buying and ownership represent a website to find more information and such a lifestyle choice for many consumers. continue their customer

journey. This ‘view- Giving a potential buyer easy access to a view through’ tracking has led many advertisers of the car’s interior or to explore every aspect to also develop more complex attribution of its features and performance can help methodologies that help reveal key metrics influence the consumer to go to the dealer and like cost-per-action (CPA) where they may actually step into that car. attribute varying degrees of credit to different advertising touch points during the process. The only thing missing from a well crafted Digital has helped advertisers widen their view video ad is that new car smell, and knowing of the entire marketing funnel and identify how the innovative nature of the digital advertising different ads can play key roles like introducers, industry, you just never know when that might influencers and closers as part of the overall be the next innovation. consumer engagement. 13 Source: http://www.doksinet Opportunity: Creating

the Educated Buyer Opportunity: Audience Targeting In general, consumers today are more Digital advertising offers the ability to target educated than ever before. The resources that consumers in ways that no other medium can they have to pull from are vast and offer a mix easily match. of hard data, advertising content, consumer opinion, and third-party reviews. Since Targeting the auto buying consumer can also consumers are actively educating themselves happen through each phase of the buying and taking advantage of many sources cycle, from dreaming and researching to of information along the way, automobile deciding and buying – and each is a perfect companies have the opportunity to become fit for digital video. Beyond behavioral a key part of that process. Potential buyers targeting, digital advertisers can also target want to gather a lot of information and there their audiences geographically, down to the zip is simply no doubt that video content is a

code level (not to mention various proximity huge part of that research. Engaging, high- based targeting capabilities available on definition video that lets users truly explore mobile devices). This type of tight geographic the car of their dreams can be a major factor targeting is a boon for dealerships and dealer in their decision process. By making it easy associations that may only want to reach for consumers to complete a good portion of an audience within a certain radius around their research through the advertiser’s own a dealer location or group of locations. For websites or interactive ads can begin building example, if a dealer is running a special on oil rapport that can translate to a purchase changes, they can target an audience within decision. a certain zip code around the dealership to drive consumers into the service department immediately. 14 Source: http://www.doksinet Best Practices/Tips The auto industry is already using and experiencing

the benefits of digital advertising and digital video to engage potential buyers. Here are some best practices to consider when looking at launching a new digital video campaign: * Make use of various types of audience targeting available in digital marketing. Whether it is behavioral targeting, identifying buyers in different phases of the customer journey or geo-targeting to ensure you are only reaching consumers who are near your dealership, effective audience targeting can improve the performance and ROI of your campaigns. • In a perfect world, high definition video created specifically for digital is the best way to engage consumers. However, if you’re just now beginning to test digital video advertising, repurposing your TV ad content can be a great way to get started. • Your website should provide a seamless transition for consumers who viewed your video ad. Make sure when they click on an ad, the website picks up where the video left off. Deliver more of the same

type of content that drove their initial interest. • Think CVR (Completed View Rate) instead of CTR (Click Through Rate) and make sure you are tracking view-through activity to your site (consumers who viewed an ad, did not click, and later visited the site). • Start optimizing for millennials. Ensure that mobile is a major part of your video advertising strategy and use short, snackable videos to grab their attention. 15 Source: http://www.doksinet The Publisher Perspective What digital publishers should know to better appeal to auto advertisers. • The auto industry is one of the biggest advertisers in digital. Look for ways to identify and highlight potential auto buyers from your audience and make them easily available to advertisers. • Remember that automotive advertisers across each of the three tiers have different objectives and consider how to highlight your inventory and how it can match up with each one. • Highlight your millennial audience. The

recently crowned ‘largest generation’ represents a major opportunity for auto advertisers. Help them connect to this younger audience • Focus on interactive ad units. These units have tremendous potential for auto advertisers If you don’t already offer interactive ads on your site, this might be a good time to consider your options. 16 Source: http://www.doksinet Conclusion The automotive industry is already one of the leaders in leveraging digital video and cross-screen advertising, and the potential to continue leveraging the medium in new ways grows every day. As an industry that truly combines online and offline advertising it has the ability to take advantage of the best of both worlds. The potential for advanced digital targeting and measurement is tailor-made for the various tiers within the auto industry, providing each one with capabilities that aren’t easily matched by any other medium. With the evolution of the car buying process, companies that make the best

use of a combination of traditional and digital video advertising are definitely in the driver’s seat when it comes to adapting to the emerging millennial buying market today and in the years to come. Endnotes 1. US-Auto-Industry-Middle-of-Robust-Digital-Ad-Spending-Growth, emarketer.com, June 8, 2016 2. The Future of Auto Marketing Could Be a Little Creepy Get ready for Brands to Follow You Everywhere, Mike Shields, AdExchanger, October 17, 2013 3. Mercedes-Benz Uses Influencers to Reach Millennials, Digiday, August 2016 4. DealerSocket Data Reveals 5 Untapped Strategies to Acquire More Used Car Customers, Dealer Marketing Magazine, February 2016 17 Source: http://www.doksinet (303) 345-6650 www.spotxchangecom 18